outlook for germany, the netherlands and luxembourg from negative to stable. greece could leave the euro zone to set off a chain of financial sector shocks that policymakers could contain at a high cost. the troika is returning to athens today. inspectors from the international lenders keeping greece afloat have to decide whether to continue the lifeline. the euro zone's sector is shrinking by the sixth month in july. manufacturing output dropped sharply, but we have a different story out of asia. there's a closely watched manufacturing index that rose to the highest level since february. the catalyst on this are pickup and output and signs of improvement in new export orders. andrew. >> text instruments is reporting better than expected earnings after the close. this is the important part. the chip maker warning that current quarter revenue is

weaker than usual for this time of year. texas instruments says customers are cautious due to global economic uncertainties. you see it there. shares fall slightly in extended trading. the 2 q results beat the street. they say they're making progress to increase the number. the stock hit an 18-month low last week on worries the weakening chinese economy could hurt it. pfizer's experimental alzheimer's drug failing one of four big trials. it involved patients with mild to moderate forms of disease, it did not improve cognitive and life function. johnson & johnson is partnering with with pfizer on that treatment. they'll continue with three other late trials and you can see it falling on the news. irish drug maker has a long-standing financial interest in the drug and its shares were

also hit the hardest. we've also got a bit of deal news. car law group and bcb parngs joining forces in a bid to bayou nighted technologies industrial business. the transaction could be valued at more than $3.5 billion. >> we have earnings just coming out. dupont hitting the wires. the company has earnings slightly better than expected, $1.48 versus the $1.46 the street was looking for. revenue looks like it's a little light. the company is also saying it's looking for full-year earnings to be towards the lower end of the existing yoult look range of 420 to 440 a share when you strip out significant items because of uncertainty associated both with the macro environment and currency as well as a higher tax rate related to the earnings mix. 4.20 and 4.40 is where they told the street. that's in keeping with what the street is expecting right now, too. this may not be much of a prize

to wall street. their earnings today coming out two cents better than expectations at $1.48. they pound to things happening right now. comments from ellen coleman, who is the chairman and ceo. she says the agriculture food and biosciences are performs exceptionally well globally when you look at corn prices and things but the advanced materials business -- and other advanced material businesses are achieves solid results and continued weakness in europe. >> this is the story of the earnings season, though, which is to say everybody is beating on the bottom line. there's a lot of messages on the top line. what does it mean long term? >> more than 65% of the company have missed on the revenue lines. it's from global companies dealing with currency issues coming back in. that means they have lower costs in those arenas. i wonder if it means we've peaked out in terms revenue or if this was a one off because of

some of these currency issues. >> if that's true, we have larger problems. >> margins have not been bad, though. margins continue to improve. >> if margins are improving and keeping up the bottom line, they're continuing to squeeze. goldman sachs had an interesting report out overnight on just this issue. >> right now just looking at this bid on dupont, which is a dow component, it's too early to say where this will shake out. we'll keep an eye on it as we get closer. look at the markets overall right now. futures are weaker this morning after big losses yesterday. i guess the positive news from yesterday is we paired those losses by half by the time the closing bell came around. the markets down by over 100 points and they're indicated down by 11.5 points. s&p futures and nasdaq futures indicated lower. oil prices came backhandily last night. at this point they're up 39 cents but well below what we've seen in recent days after

concerns of what was happening with iran. if you look at the ten-year, this was the big story. it was trading below 1.4% yesterday. right now the yield is higher at 1.448%. that was a record low level, and that was huge news. >> i told you i had the phone call with the mortgage -- i don't think if i said that on the air or on the commercial. i had the phone call with the mortgage broker yesterday. >> it fell below 1.4 at one point. >> i don't know if we got the bottom or not. we might have missed it, but we're trying. >> let's look at the dollar. the euro is the big story and the weakness with the euro. this morning you see that the dollar is stronger once again against the euro at 120.99. joe is over there and is going to get his way. he talked about the euro at $1.20. it might happen while he's there. the dollar is down against the yen at 78.20, and gold prices which gave back some ground yesterday morning are down once again by $2.60, $1,574.80 an

ounce. >> i hope he hasn't blown all the money out yet. let's go across the pond not to where joe is but close. it's time for the markets report. kelly evans is standing by in london this morning. kelly. >> hello, andrew. as you can see behind me, a little bit better picture to the euro stock 600. one in particular to watch, swatch is the company in question. up almost 3% in the morning. we'll come back to that. we'll have a broader sense of the market action we're seeing, about roughly split. the stock is up about 0.1 of a percent this morning. it extended into your trading session. ilgts quieter today. really spain is want one to watch. the ibex 35 after instituting a short selling ban, what happens? falls out the bed.

down another 2%. why? if you're exposed to spain and can't hedge or short that position, you have to back away. buyers' strike continues. the dax is up 0.4% right now. the ftse is up almost 0.2% in the uk. i want to show you starting over here with germany the ten-year. actually, the price is losing some ground today. the yield has risen to 1.248%. that's an interesting development to keep an eye on. the rest of the story today, guys, spain. we have seen the yield curve starting to invert. if you look closely, the yield on the five-year is higher than the yield on the ten-year, which is 7.58%, typically a recessionary sign. this two-year does not bode well. it reminds you of the price action in it lae last fall and

the ecb had to rescue. spain auctioned short-term debt that wt off reasonably well in the market today. not doing much to change the picture here mplt let's get back to swatch. they're one of the green spots this morning, guys, the almost 3%. a great interview, very colorful interview earlier this morning on europe "squawk" with the ceo. he was asked about whether the market today, whether conditions today were similar to what we saw in 2008 given up all the fear and panic we've seen lately, and here's what he had to say. >> i think weather forecast is more reliable than what is said at the stock market. we should stop with it. let's look at the real facts and be calm and continue to do the business. >> a very colorful interview. i encourage everything to go online and look up the whole thing. he really rails against broader market activity and he's continuing to build a business. the company does see a slowing

in china but more in the high-end market that their lower end brands are growing 30% to 40%. it's the omega type lines where they see a slowing. it may be people shifting to buy those watches in cheaper locations, which as far as swatch is concerned, is business. on that note, back over to you d guys. >> thank you very much. we'll check in a little later. what do you think? you see the five-year versus the ten-year yield on the spanish. >> i'm thinking i'm buying? >> are you really? >> no. >> you're crazy. >> we near we were in big trouble. the question is how it happens. >> this is the level where it forced change to happen urns burs burlisconi. customer ks make deposits by submitting a photo of a check through a smartphone.

citi group and chase offer services like this. >> we did it on the set with his check. >> when he paid you to read his book. >> he could not believe we cashed that check. i still have the check. i'm thinking the framing the check. >> you can keep the check and deposit it. >> that's the best part. the thing i worry about that it certain people by accident try to deposit the check twice. >> wouldn't the bank catch on that? >> i assume they would. i don't know. >> wells fargo launched its mobile check deposit service earlier this year, and the bank will gradually expand the program across the united states by the end of the year. also, we talked about china. china plans to double the amount that insurers can invest in private equity. the country is set to let some companies trade financial derivatives both at home and abroad. these moves are part of china's efforts to broaden it. >> let's talk about mitt romney. he's taking his campaign

overseas. he shifts his focus to foreign policy this week with a major speech and overseas trip to three different countries. today he addresses a veterans of foreign wars conference and he'll visit the uk, israel and poland. all is parts of a trip to the beginning of the olympics, which begins at the end of this week. >> did you see the "usa today" poll that's out that says romney is trusted more on the economy when they actually went through and put some of these questions that had gone into it. something like with his business background 63% think he will make good decisions on the dme based on his business background. 29% think he'll make bad decisions which raises the question whether all these attacks about bain and his business background are really the right strategy for coming at it. >> what do you do? what is the right strategy? >> i've always questioned that. the idea of attacking a business background as being a bad thing. >> i thought it was the right thing. >> to attack? >> no. we talked about it before.

he should embrace being a private equity guy. i'm a mr. fix it guy and this company needs fixed and that's what i do. >> the president came out well in terms of likability. he's more likeable than romney is, but this is a huge question mark about the way the negative ads have gone against romney and whether it's a totally wrong strategy. >> if you're obama, what is the right strategy? >> i don't know. i guess make people -- make it more about you if people like you more. >> i don't know. that's tough for obama right about now. by the way, just because we're talking about it, can i mention it? >> we were looking at the front of all papers. today everybody is looking at the colorado shooting. there were two pieces of news overnight. one was a sad story out of pennsylvania where there was a batman showing, and a fight broke out. now apparently everybody left the theater freaking out. >> i would, too. >> it was a very scary story. >> the other thing that's good

news, warner bros. is making a huge donation to the victims in colorado. i thought it was interesting. the last piece of this is i was sort of frustrated yesterday and went online to see how easy it is to buy some of these things. i don't want to suggest what is possible. it was unbelievable. i'm sure someone was tracking what i was doing, and he wasn't trying to buy a gun or ammunition. with one click you can do it these days. did you know that? >> it's why there's going to be such a bigger focus on gun controls and gun rights. >> did you see any focus -- >> mayor bloomberg and others are talking about it. >> you don't see it from the presidential candidates, and that does not poll well on this country. i'm on the opposite side of that issue. let's talk about some other news this morning. google and facebook boosting their federal lobbying spending in the second quarter. google increased the amount by 90%. that's year on year to $3.92 million. year-to-date facebook's already spent more than 1.35 million

that it spent in total on federal lobbying in 2011. target issues include online piracy and pattern changes and immigration reform. >> new yorkers can have their say on mayor bloomberg's proposed ban on large sugary drinks starting today. there's a public hearing scheduled for 1:00 eastern time. it arequires the approval of the board of health, but they could convince legislators to step in and stop the proposal. if you have an opinion on t-we'd love to that's true from you. over whelmingly people are out against this. the idea they want to decide where they use their calories for the day. it's also interesting that the mayor pointed back to this and said this was the way people felt about smoking and look what happened with that ban. >> i don't want to seem like a complete idiot, but yesterday we talked about the 16.9 ounces.

>> half a liter. >> 16.9 ounces. we were talking about why it was a standard size. that's the standard size. for our audience in europe, thank you. coming up, earnings the story of the day. you heard about dupont, but we have a lot more. at&t, ups and we have a number of other ones. we take a look at anames to watch, but first, attention aspiring "american idol's". becky, he hope you're watching this. there is a new person to impress. grammy-winning pop star maria ca carey will join "american idol" next season. for those of you playing money ball at home, the news reports say she's paid a whooping $17 million. >> wow. choose control.

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welcome ba. the equity futures are indicated slyly lower. they were down by 30 points after big losses yesterday. again, at the end day the dow was down by over 100 points and that was less than half the losses we'd seen earlier in the session. in our headlines this thursday morning, warning brothers reporting that ""the dark knight" rices took in as the debut felt the impact of last

week's movie massacre in colorado. rebekah brooks will be charged with phone hacking offense. the david cam ran oes ex-media chief and six staff are also to be charged. right now let's go over to alex wallace from the weather channel channel with today's national forecast. alex, good morning. >> good morning to you. unfortunately, not a great morning for us weather-wise across parts of the midwest. right now we have a severe thunderstorm watch in place for the chicagoland area and across northern illinois until 9:00 local time. look at this nasty cluster of storms in that general drekdz. there's a warning on the storm cell at this point. we have seen damage reports of trees coming down across southern wisconsin and northern illinois. these storms mean businesses and there's more storms to deal with in the north and west in the twin cities and down around

cincinnati. that's the general pattern through the mid-part of the week. we have this boundary stuck in place across the upper midwest trailing into the mid-atlantic region. these storms ride up through that general vicinity, while the middle of the country stays hot and dry. some of these storms could be strong to severe throughout you're day, getting down into the southern mid-atlantic. damaging wind and hail is the mainly risk, and the darker shade to the red, we could see more storms develop late into the evening and overnight hours. minneapolis backed ut again towards chicago. outside of the storms there is that heat. more heat advisories to deal with for the day. kansas city, st. louis over towards western kentucky including paducah. heat index values brutal. it will feel like it's around 105 to 110 degrees. actual degrees for today 10 to 15 degrees average. it's going to be stifling, so take it easy today and even into tomorrow. so guys the hot summer, it

continues. >> thank you, mr. wallace. let's talk about the markets this morning. of course, worries over the euro zone debt crisis and earnings on the home front continue to drive the markets. joining us is jason pride and he's director of strategy and kevin ferry at cronos future management. what's on your mind? is it earnings or europe at the moment? jace stoso jason. >> right now the economy continues to weaken a little bit. we feel we're in a third annual growth scare, but it's great for long-term investors, very few have a true ten-year horizon and mindset. therefore, you have to play defense to some degree in this environment but not too much. not all the way to the cash and non-paying assets. >> what's your version of defense right now? >> it's the middle of the risk spectrum. dividend growth stocks on one

side and having some credit risk in the form of high yield bonds and international sovereign debt. >> mr. ferry, how are you feeling about that? >> well, yeah, i think that's good for investors, but the world is full of traders right now. people are more like me. i think yesterday was a telling session, because it could have really gotten out of control. it didn't. so that's one of the few days where i say -- >> you say that's a good sign, that we didn't get quote-unquote out of control? >> i think that's a good thing, yes. usually if you say oh, well, it was down 200 and finished down 100, that doesn't really impress me. certainly yesterday was one day it did. i think maybe above 1347 in the s&p futures today, things look a little brighter. and we have to come with some paper. you saw the short end in spain this morning, so we have bills and notes coming here in the states, too. look for a little concession.

rates aren't going up dramatically, but you look at record low yields that might be tricky to get this paper off. >> how are you thinking about volatility right now? >> it's -- they're doing everything they can in every central bank around the world to lock it down. so i think that's a danger. i'm in favor of more volatility, obviously, but i think it's dangerous because the policy is try and keep the market as locked down as possible until they sort things out. you can see friday and yesterday that the markets have a way of finding their way out of the cage. that's why i think it got a little stretchy for sure in the first two hours yesterday. >> jason, i just want to -- because you're not trading day to day. you think about this a little bit longer term. if you think we're hitting the fiscal cliff or at least the debate will continue, do you think that the spanish issue and the euro issue is not going away, why not be more defensive than what you talk about?

everybody is in dividend yielding stocks right now, and i wonder whether there's a bubble in that market onto itself. >> the valuation there is are definitely something that cause us some concern every once in a while. when you dig into it, a downside scenario of the type that you're talking about surrounding the fiscal cliff or the situation in spain is going to impact the more cyclical companies. those dividend growth companies not necessary high yielders, but dividend growth companies, high quality companies are more likely to have an ability to carry through their business with a disaster snare yoi. with the risk to the yound side, that protect is important. >> jason, separate out the disparticulars and throw out names so we understand what you're talking about. >> sure. dividend growth are companies that be capable of carrying forward a dividend payout ratio and a growth to that dividend over time. examples include phyllis morris international, colgate pal

monthly live and the companies that stabilize their eshg earnings in a downside economic scenario. >> you're saying to stay away from which thing? >> staying away from the more cyclical stocks more expose to the economic cycle. they produce economic growth in a slow economy anyway, and on top of that their propensity for dividend growth in a more sdus yus period is lower. >> we thank jason and kevin this morning. we appreciate you guys being with us. >> there's more news coming out with that hacking scandal. >> yeah. >> with "the news of the world." apparently brad pitt and angelina jolie were named by british prosecutors among the alleged victims of the phone hacking. so we're getting more details on this. we'll hear more as we get through the morning. >> i never understood where all of those tabloids got their news. now it may be a little bit clearer. >> okay. >> when we come back we talk to

the head of software giant s.a.p. tech spending, the impact of euro crisis and push momuch mor. >> do you think we've been hacked or you've been harked? >> i suppose it's possible. who would care? >> well, for you. for you. >> maybe you. first, though, have you checked out google this morning? if you do, you see a doodle of amelia earhart. the aviation pioneer would have been 115 years old today. check it out. >> you know who used to be in charge of that? marisa meyer, all of them. between listening to the numbers... ...and listening to your instinct. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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good morning, everybody. welcome back to "squawkbox" on cnbc. i'm becky quick along with andrew. joe is enjoying ditime off this week. in our headlines we watch shares of dupont with quarterly results in the last half hour. they earned two cents better than expected. revenue was slightly short, but the company talked about what it sees in terms of the full-year outlook and it was at the lower end of guidance between 4.20 and 4.40 a share.

also hearing from whirlpool today, that company coming in with earnings of $1.55 fell short. revenue is missing the market. spain is in the headlines today paying the second highest yield on short-term debt since the birth of the euro at an auction today. investors think the country may need a full sovereign bailout, and the reflections are there in all of the yields. the five-year is at 7.6% earlier in morning. as kelly pointed out earlier today, that's a bad sign and it's something the markets pay an awful lot of attention to. >> let's take a quick economic on the markets. you can look at the futures right now. well, you know, not so bad on a relative basis to where we were yesterday. it looks like we open 40 points lower and nasdaq is off 20 points and s&p 500 is off 5 points. you can look at the oil boards there, as they flip around on us.

you can -- well, crude is on -- i can't get that excited about this this morning at the moment. can you get that excited about any of these numbers in. >> crude oil came down sharply yesterday. that was a big deal. >> as a non-driver it's difficult for me. >> i shouldn't be allowed to read any boards. i look at these things for the mortgage. let's go back to the ten-year. you can see there 1.438. again, i have to get on the phone. my broker got the e-mail right now. the dollar board as we think about it. joe, he's there. no, but now -- >> 120. >> he wanted 120 and pafk basic got t. he's probably having lunch, and it just got a little cheap cheaper. let's talk about the gold boards real quick, we're at 157.34. if you have comments or questions about anything on "squawk," shoot us an e-mail

this morning. coming up, the inside line on apple. it's going to be the big news later this afternoon, a new iphone expected this fall. so analysts are now fearing that consumers might be delaying their purchases until then. i'm among them. does this take a bite out of the company's earnings? that's coming up after the break. tdd# 1-800-345-2550 the spx is on my radar.

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welcome back "squawk" this morning. we have red arrows across the board. not nearly as bad as yesterday, but still down nonetheless. the dow opens about 40 points off right now. let's get through the headlines right now.

russia's state oel company has expressed interest in buying bp's stake in tnkbp and would enter talks. >> tech giant s.a.p. is giving earnings this morning. the numbers were what we expected, and they are strong numbers. the question that comes out of it is where do licensing sales stand right now, and how do you feel about things? there was a big shake-up with the team in the first quarter. what's the situation right now? >> becky, thank you for the question. the last time we were together, i assured you we would have a strong second quarter. we did. every region around the world grew in strong double digits for s.a.p., and this idea of customer driven innovation is really paying off. we went from mobile, went for real time enterprise with our innovation and we went for the cloud. all three areas are growing in triple-digits. we feel excellent about the team

specifically to answer your question in north america, but moreover globally we're the fastest growing business software company in the world. we feel good about ourselves right now. >> let's talk about the cloud, because that's an area that a lot of people thought hurt companies like s.a.p. and oracle. you embraced it. where are you headed with the cloud strategy? >> this is a consumer-driven revolution in the world today. our consumers are on mobile devices. they'll be 20 billion devices connected either machine-to-machine or person-to-person by 2020, which is why we knew we had to center the strategy on mobility. cloud becomes a very exciting deployment option, because many companies are bogged down with old technology. they need to reinvent themselves quickly, so the time to value in the cloud is there. we went for human capital management because talent is an important thing for companies to manage. we did that first.

we have business by design where we manage small and mid-sized in the cloud, and we continue it to evolve this around the customer and supplier as evidenced by our desire to acquire areba. >> what percentage of your sales is the cloud makeup right now versus the old-fashioned stuff we know so well? >> it's still a small percentage of the overall pie, becky. it's single digits. the important thing is it's growing in triple-digits, and we're on our way to achieve our vision which is $2 billion in cloud revenue by 2015. >> wow. >> the other thing that's interesting is with the acquisition, a lot talk about the social network, but what's interesting is we have the bissonnette twoshg that connects buyers and sellers all over the world in a cloud environment. you make it on the buy and sell and providing the software as a service to the client. this is a big, big business for

us. >> your numbers are very strong. you're also saying that you're affirming your guidance for the full year on this. what do you see happening in europe right now? we watch yields this morning in spain, and it gives a lot of people pause. what do you see just on the ground? >> we're seeing an environment of permit uncertainty. things are going to be uncertainly as far as we can see into the future, and that's why we believe this idea of business technology is the important force for growth. if companies are managing risk or they're managing margin where they have to optimize their work force and their supply chain, they need s.a.p. if they're going to growth, they're trying to reach into new markets around this global economy, they need s.a.p. we're strategically relevant in down or up times sxiand iblg ita level of unsernlts. what's interesting about the position, we grew 22% year over year in europe, and i told you

guys the last quarter i believed in europe and see a robust pipeline. so i think there's the whole ecb issue and getting the fiscal policies in order, which will go on for a while, but then there's the idea where companies have to grow. they have to compete in a global economy, and they need s.a.p. >> well, bill, we want to thank you very much for joining us today and congratulations on your numbers. >> thank you very much, becky. >> let's talk apple this morning. it, of course, is set to report quarterly results after the bell today. will power is analyst for robert w. baird and he joins us from dallas to explain what we should expect later today. will, we get earnings out of at&t, which should give us an indication of where things are. what are you expecting before we get any further? >> good morning, andrew. we're expecting solid numbers from apple. i think verizon helped to validate that a bit last week. we have another bright spot from

at&t this morning. there's 7 million irrelevaiphon beat our estimates. i feel good about this quarter. the bigger question is probably the september quarter, which is the fiscal q 4 for apple. >> what about folks like me? i have to have sort of a confession to make. i probably need to buy a new phone but i'm not because i wait for the new iphone 5. isn't that what everybody is doing right now? >> i think you'll see more of that as we move through the summer. the reality is you look at verizon's numbers, they sold another 2.7 million ifoiphone, it was only down moderately. the other thing that beb p benefits in this quarter is the laurchl of china telecom, which didn't occur until march. that's the first full quarter for that carrier this china. into september you will see more delayed purchases, and our expectations is you see iphone

sales down swent shally then. >> i'm waiting for a i know phone with a keyboard. >> i don't know if we'll have an iphone with a key board. >> you may have a longer wait. you have a report that says -- i don't think if people can get in there. this is what you think the new mini ipad is going to be. you think this is going to change the business. there's a smaller ipad in terms of the sizing of these things. i don't know if people can see what i'm talking about. when do you think this new ipad is coming, and how is it different than what google put out, this new nexus 7 that i was playing with over the weekend? >> those are all good questions. we haven't put anything in our numbers at this point, so i think it's still speculation. i think often as is the case where there's smoke there's probably fire. there seemed to be increasing indications that they are leaning in that direction to help further segment the market. their view is it opens up additional opportunity. form factor wise it's probably similar to the nexus 7 in size.

it brings all the other intangibles that apple brings to the plate in terms of usability and the app store and et cetera. so its software side of it. >> here's the big question i have. given the target on this doc and the expectations for apple, if they don't come out with a new product or a new ipad, how does that change your assumption about what's going on? how important are the new products rather than just keeping up with the joness but continuing to iterate on the current products we know about? >> there's no question it's critical to the company's future in the next couple of quarters it's not quite as important given we have iphone 5 in front of us. as you move into 2013, investors are laser focused on that and maybe a smal you are iphone at some point. to maintain their leadership, you have to it can to move

forward. that's something we're content to look at. >> how concerned are you about market compression and i ask that in the context we've seen reports and apple has said for example they're trying to pay people in china more in terms of wages and labor. you've also heard it for apple store employees. >> that's a fair question and big one for apple as we move forward. 44% gross margins, and that's well above the industry average. other smartphone providers are in the mid-20s. they have iphone margins north of 60%. long term those proeshl are sustainability. near to medium term as we look at component costs and the continued high-end leadership, they post good margins. over time there's some risk there. >> we have to run. is this a trillion dollar company in three, four, five years? >> i think nail certainly make a good run at it. >> okay. we'll leave it there. will power, thank you so much for joining us this morning.

>> great. thanks for having me. >> when we come back, maybe you're looking to get away for a little r and r. how about your own island? we'll talk about why buying your own piece of paradise could be cheaper than ever. >> they have rights to show my island on tv? >> if you're a billionaire. and then later why a group of u.s. lawmakers want to give the s.e.c. more firepower. senator chuck grassley will join us to explain at 7:50 eastern. >> tomorrow on "squawkbox" a busy morning for earns, boeing, caterpillar, ford and pepsi all due before the opening bell. we'll bring the numbers and plut interviews with the ceo of caterpillar and the cfo of pepsi. the guest host is sandy wilde, former chairman and ceo of citi group. don't miss "squawkbox" starting tomorrow at 6:00 a.m. eastern.

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♪ welcome back, everybody. we are joined in "chairs" this morning by cnbc's wealth editor with a perfect story for anyone in need of a vacation this morning, robert, we are are all ears. >> private islands, if you ever dreamed of having your own

private island now may be the time. prices down between 20% and 80%. there are more than 600 private islands for sale around the world, we did island shopping and found this one off the coast of new zealand, got a couple of beaches, a small cabin, helicopter pad and 155 acres of wilderness, so this is kind of a good one for the rustic billionaire. it was originally priced at $4 million, it's now selling for $788,000. >> you don't have to be a billionaire to own that island. >> how do you pronounce that next one? >> "leaf key." it's got white, sugary sand, deepwater so you can dock your mega yacht, a neighboring golf course. the original asking price was

$24 million, now on sale for $7 million. this next one is my favorite, buckeye land, 43 acres in the british virgin islands, comes with a cliffside mansion, beautiful house, lots of infinity pools, clubhouses, marinas, priced at $50 million, now $35 million. >> that's my kind of house. >> exactly. where we're seeing a fire sale, however, is in greece, so financial troubles there good for island buyers. there are dozens of islands on greece. there's so much red tape and uncertainty, questions over land ownership. no one's closed a deal but you can buy an entire chain of five islands in greece an entire chain of islands for less than 5 million euros. when you're rich you have a private island, when you're super rich you have your own archipelago. >> the idea all of the islands

are for sale, people figured out if you own an island it's pretty tough to maintain, tough to get to, and there's not as much money to go around as there was a few years ago? >> the dream of owning a private island was better than reality. lot of rich guys during the 2000s bought a private island, the ultimate status symbol, they found the maintenance costs, getting permit from a corrupt government, a lot bought islands off the coast of belize and found out they were infested with mosquitmosquitos. if they have kids soccer games we can't go to the $75 million island so the practicalities caught up. >> was the idea of owning an island made popular in the 2000s, early 2000s or something or is this something on again off again or decades? >> it came to the forebecause

there were a lot of people with a lot of money in 2000s, johnny depp, richard branson. >> i have been to necker, one of the great islands. it's extraordinary to have your own island. the cost of maintaining i can't imagine but he rents his island out. he does, necker, you can go there. >> mostly supermodels i think. >> $200,000 plus a week. if you want the island you get 12 or some odd bedrooms, i'm mispricing this i'm sure, richard would be watching and telling us we're wrong but it's outrageous to maintain. he had a fire on his island. >> celine dion is selling her island in canada. lot of the wannabe wealthies said i want my private island. it's expensive and you don't go that often. i found some islands we talked about -- >> in our price range. >> in our price range. there's a $30,000 island off the coast of pan la, island gatoon,

$30,000, another off the coast of brazil, $79,000. >> $30,000 for a squawk island and we have a show. >> you can go with the mosquit mosquitos. >> i like this idea. >> not so much. >> i looked around and there's a story in "usa today" that companies at this point have said if you want to travel for work, if you're traveling for work and you want to check your bags that's fine but it's going to be on your dime which is insane, the idea of a company saying that, yeah, we'll pay for your airline ticket but if you want to bring anything with you you don't carry on, get it yourself. the fee revenue has been a bigger source of revenue for all of these airlines, united took in $5.2 billion. >> really?

>> is that billion dollars? it is, $5.2 billion in these checked bag fees. delta took in $2.5 billion. american took in $2.1 billion and at this point companies are looking for ways to cut costs. they say forget it. they're not only not paying for your bags that you check, they're not going to pay for your beverage costs on board, something like 42%. >> ice cream, i buy all those things. >> you wind up at your business meeting with a rumpled suit and you're tired and thirsty so that's not good for anyone. >> anyway, when we come back -- robert, thank you for that. >> we are going to buy an island. >> we'll take up donations. "squawk" will be making a deal with scott sperling of thl partners. stick around. at a hertz expressrent kiosk, you can rent a car without a reservation... and without a line.

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earnings season in high gear and europe's fiscal fears. got the market moving information you need to know only here. standard and poor's alec young and squawkmaster jeremy siegel here to weigh in on the politics and the economy. and delivering profits, the pizza powerhouse out with earnings, slicing into the pie with domino's president and ceo patrick doyle. the second hour of "squawk" begins right now. ♪ good morning and welcome to "squawk box" here on cnbc, we're still waiting for our domino's pizza this morning. i'm andrew ross sorkin along

with becky quick. joe is off in europe but the euro is down, he's a happy man. the rest of the world not so happy, the do you looks to open 41 points off and the s&p and nasdaq off marginally in the moment. spain's short term debt costs continue to rise. spain paid the second highest yields in the euro era in selling $3.7 billion worth of three and six-month t bills in and secondary market trading this is a potential problem the five-year yield went above the ten-year for the first time that's happened in 11 years, and a measure of china factory activity at a five-month high. the managing index rose to 5.5, close to the 50 level from expansion to contraction. whirlpool earning $1.55 for the second quarter, nine cents short of estimates, revenue on

the light side as the company was hurt by europe's economic woes and stronger dollar. earnings in europe's fiscal situation continue to drive the markets. i didn't think us from new york is alec young, global equity strategist and guest is jeremy siegel, our squawk master. welcome to both of you. europe we've been watching closely yesterday and today with all of this news, andrew was talking about out of spain. both of you are looking at europe and say there are no easy fixes to this but both of you think stocks are going to go higher from here anyway? professor? >> yeah, i think that certainly a lot of europe -- europe and the fiscal cliff are the two big depressants on the market. and we have seen the euro come down, i wrote an article about a month ago saying i thought it would help a lot if it went down to $1 per euro and there's more

talk about that. it's half way down, $1.40 to $1.20, and this is going to help. is it enough? i don't know. i would say almost 50/50. i don't think we're going to have -- i think the ecb will step in to stop a banking crisis, but i think we're going to have a recession in spain, greece, portugal, for years to come and they may have to drop out of the euro at that point saying listen, we just cannot cope with this currency anymore. it's not eminent. they won't be kicked out but you know, hopefully a lower euro will get their exports going enough to keep them in the game. >> jeremy, that's where i follow everything you're saying with that but what i wonder is you're looking at dow 15,000, perhaps even dow 17,000 by the end of the year. with the huge overhangs, what do you think actually gets us to that point? >> well it's at the end of next year. >> oh, next year. >> that's very, very important. i don't think we'll get there at

the end of this year because of the fiscal cliff and because of europe. i think europe's situation will clarify by next year and i think the fiscal cliff and we're going to talk about that later i hope because that's really what's bearing on the market right now, i think it's going to be resolved to people's surprise by next year, that's going to be a big stimulant. 15 on the dow will come, but probably not at the end of this year. >> where do you think we are at the end of this year with the huge overhangs? >> well at the end of this year, we'll talk about that, will the lame duck session actually extend for one year all the tax cuts? if we can have that happen i think we have 1,000 points on the dow easy. if they kick it ahead, we're going to let the cliff -- we're going to fall over that cliff, you know, you're not going to be much higher than a day at best. >> alec, let's talk about your perspective, you have the same concerns about what's happening with europe in particular. although you're still looking by the end of the year for stocks

to be higher, 1400 on the s&p, is that what you're saying in. >> becky, i think europe is going to remain a headwind for us, going forward, pretty much permanently, but i think as the professor mentioned, if we can get a little bit better visibility on the tax regulatory front out of washington, i think we can definitely see some pe expansion which can get you up to the 1400 and higher level, people would have more confidence in earnings expectations for next year, which cap iq has at 12%, given the macro risks, people aren't willing to pay up for the earnings, they don't believe in them. washington holds the key. i think europe will remain a mess but question work our way through it if we get a little relief in washington. if washington just winds up compounding the european problem, i think we probably head into recession, earnings are probably peaking as we speak, and things can get really ugly, but our base case is that the markets will get more than

they expect as crazy as it may sound, out of washington, just because expectations are just at rock bottom right now. >> are you in the same camp as jeremy thinking that we could see the bush tax cuts extended for another year? is that the most likely scenario in your viewpoint? >> i hope so. lot of investors are assuming that. if you look at the election and timing, would it happen in this year, not until 2013? if it didn't happen until 2013 you could see a heck of a tax loss selling. house holds over 250 see cap rate go from 15 to 45. it's not just getting the extension, it's when do we get it. i hope the professor is right. lot of investors are hoping for that. we need to see some meat on the bones. in addition one of the things holding back the job market apparently temps are all the rage in corporate america because you don't have to pay them benefits. there's regulatory uncertainty

that has nothing to do with the bush tax cuts that needs to be addressed. i think there's room for higher valuations in this market, if we can get washington out of the way. >> alec, real quick, talk about the tax selling, in terms of timing when do you think people will start selling and how will that impact the markets as you look at the fall? >> as the professor said a lot of people are expecting a last-minute extension so people will hold off on that tax selling until very late in december until they really feel like hey if i don't do this now, i could be paying three times as big a tax on january 1st but i think people are going to hold off because they're hoping for this extension, and if they like the position they're in, they don't want to sell it unless they feel there's a major tax bite coming. the tax loss could be intense but it will probably come late because investors will be waiting to see what's going on with the bush tax cuts. >> jeremy, i think you're optimistic in terms of thinking

that we could get a solution before january 1. i think eventually washington will reach some sort of decision, there will be something that happens but i wouldn't be surprised to see an awful lot of gas and the lame duck session, that it could come up with a decent solution i don't hold out a lot of hope. >> it will be temporary. hey we have a new congress, we may have a new president, we're going to now delay it for this new congress and new president to decide. i don't think they're going to get a grand solution by any means, no. the thing is we're going to have an election, let the new people then decide what we want, and that's what i think. i think the progress is really going to be made in 2013, and i think this congress is going to give them that opportunity. >> this uncertainty, though, this thing that we have been talking about for the last several years probably not going to go away any time very soon. you're hopeful the first half of 2013 we'll see collar isn't it. >> clarity? >> congress, expectations are so

low but congress might surprise us in terms of coming to more solutions in 2013 than we certainly now expect. >> and alec, before we let you go we should talk about the sectors you like in particular. you are overweight with consumer staples, technology and energy prices? >> right. energy stocks. >> energy stocks because of energy prices. >> more because we're looking for cyclical plays where the earnings bar has been lowered to realistic levels. because of the collapse in crude oil energy sectors have been trimmed back. we're comfortable the earnings hurdle, companies can get refer to. the analysts are probably a little too optimistic especially in the out quarters like the fourth quarter and into next year. >> alec thank you for joining us today. >> sure, thank you. >> professor siegel about be our guest host for the rest of the program. we were waiting for a domino's delivery and the domino's pizza officially

arrived. it's coming on the set. >> i can smell it. >> we'll be speaking to the company's ceo in the next half hour about its earnings and the rest -- bring some pie over here. coming up next on "squawk," the man of the moment, here he is, we'll talk private equity, regulation and taxes and more, with thl's scott sperling, oversees the firm's $10 billion equity fund. and later senator chuck grassley wants to give the sec more fire power when it comes to penalties for wall street. "squawk's" back with scott and a little bit of pizza, after this. between black and white answers... ...and 1,000 shades of grey duff & phelps finds the sweet spot

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welcome back. let's look at the futures. after broad losses yesterday red arrows once again today. the futures are indicated down by about was it 35 points, down a quarter percentage point today. we'll continue to get earnings coming in, still waiting on earnings from dow component at&t. let's talk private equity this morning, what is one of the world's top private equity firms? think of the recent spotlight on the industry. joining us on set, scott

sperling, and we also have pizza on set. >> when i leave i'm going to take one of those whole pizzas with me. >> domino's still owned by bain. >> i think they still have a piece. >> i thought you were going to say a slice. >> it's a private joke. >> okay. so we had henry kravis on last week. i know you're a support of governor romney for president. are you frustrated that he has not more forcefully come out and supported not only the industry but defended what you do day in and day out? >> i don't think it's his job to defend private equity and i don't think we should be particularly offended by the attacks specifically on private equity. i think the more worrisome issue and one sounds he's addressing forcefully is a set of flot fe s the flow fees and policies that

followed that. the recovery has been the weakest we've ever seen. it's normally in the case of a deep recession you come out with stronger growth rates, not weaker growth rates and we haven't seen that, attributable to philosophy, policy, a whole set of things that is what he should be addressing, not whether or not private equity were good guys or bad guys. we're big boys and girls as they say and we should be able to take that. >> how many conversations do you have a day about the image of private equity, given romney being in the spotlight? how often do you have to talk to pension funds about these issues? how big a role of it is in your business? >> i think they understand the facts, because they've lived through it and they have depending in an increasing way on private equity to generate the returns they need to meet their pension obligations but what i think they've seen and what they recognize is the best way for to us make money for investors is growth, and that's one of the things that has most impacted us in this economy,

obviously there's a lack of growth so we have to work even harder to try to find ways to stimulate growth in this environment. it's not by cutting companies. it's really by trying to build these companies up. now, in many cases because we compete in the global environment, we have to make companies more competitive, but i think almost every one of our companies has gotten not only more competitive in terms of its cost structure but has actually grown faster than before we owned them and i think that's true throughout the industry, and i think if you look at these companies they tend to take market share and they weather downturns in ways that people may not anticipate. if you go back to '07, not trying to jinx anything here but moody's predicted most of the companies industry owned would fail. >> right. >> obviously they haven't, and hopefully if we don't have another major recession of that size -- >> what are some of the companies they thought would fail that are thriving? >> clear channel is a company identified early on that is

actually taken market share every quarter we've owned it. we've been able to build a management team i think that has done a spectacular job at generating higher levels of revenue and profitability people expect and position the company to take advantage of the limited upturn in the economy we've seen and bob pittman is doing a phenomenal job outside the account, not just the board, on this. >> these guys have had better returns over the past 30, 40, years since the beginning of the industry, then the stock market. >> right. >> you have been a bull, though, on the market, on the stock market more broadly. >> right. >> are you a bigger bull on private equity? >> i think private equity is a positive thing, and i think even the academic literature shows that private equity can surpass the general market and indexing. it's not as liquid. it's not for everybody, and you

can get some bad apples there, but no, i'm very positive on private ek withity. >> the flipside, some people suggested if you levered up the s&p the way you lever up a company you might get to the same place. do you disagree? >> it would be interesting to hear what the quantification of that, but i suspect the problem is when you just lever up, then you can't manage through the down time, the downturns and that's when you see margin calls and all sorts of bad things happening. when we lever a company we're doing it in a way where we're also hands on in terms of dealing with the ups and downs that company has so that we, in fact, can manage throughhe kind of period we saw in '08 and '09. when we were looking at companies in '06, for example, we felt that the environment was starting to get pretty pricey, largely based on the credit markets driving prices to a place that we hadn't seen in a while. we started to pull back a bit.

when we bought companies in that period we anticipated that sometime we didn't know if it was '08 or '09 there would be a normal recession. it was dramatically worse than anticipated. as you know, the advertising industry for example it was five or eight times worse depending on the definition. who would have thought the entire too industry would stop advertising? you have to manage through that. >> and the financial system. >> and the financial system. if all you did was put a debt on a passive index you'd be in trouble i think. >> so getting back to defending private equity, given that -- no, but it was a question then, given that pension funds and institutional investors have been the beneficiaries of all this, why have they not come out more publicly? i'm curious. are you surprised on that front? >> look, i think there are political realities and then there are the realities of having to meet their obligations, and i think the political realities would suggest it's not their fight.

it's not appropriate. it doesn't necessarily help them to go out and say private equity has been great, but if you look at what they're doing, take a look at their actions, they're not pulling back from investing in private equity. if you look at most of the major pension funds at least in this country you have something like an 8.0 or 8.5% return objective which they don't think they can make with purely public securities in their portfolio. >> what is the biggest sized deal you can make in this environment, talk about the mega deals of 2006 and 2007, those seem to have gone away. what is the biggest transaction we could see your name attached to? >> we did a $2.7 billion transaction, that's about as big. maybe a $5 billion transaction. credit markets are still strong, you can finance it. the amount of quantum debt is not available the way it was back in the 2007 period and that's not necessary as a result a bad thing. i think it's been healthy for

the industry to pull back in terms of the size of things that we're doing. >> scott, we have to run but one last quick question, you were still a private, private equity company. >> yes, we are. >> many have gone public. would you own shares ever in a public private equity firm like your rivals, kkr, blackstone, et cetera? >> i'm overweighted in private equity exposure so i'm not sure i would personally do that, not trying to duck your question too much but you know, look, they're building big asset management firms that, i know obviously know the people running them very well, i think, they're exceptional managers and so as you look at the universe of public stocks to buy, i wouldn't believe that you should shy away from them. they're an interesting place. >> scott thanks for coming. take some pie on the way out. >> i'm going to. try to catch me.

dow component at&t we're expecting the numbers and the instant reaction, as soon as they hit. up next, pepsi has something super up its sleeve. we'll find out what it is, right after this break. man, i'm glad aflac pays cash. aflac! ha! isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack! aflaaac! and everyday expenses? huh?! blurlbrlblrlbr!!! [ thlurp! ] aflac! [ male announcer ] help your family stay afloat at aflac.com. plegh! as the world around it. with the available lexus enform app suite, you can use opentable to make restaurant reservations.

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now the answer to today's aflac trivia question. what u.s. athlete holds the record for most olympic medals won by a male? the answer, michael phelps. >> go michael phelps. pepsi scored the super bowl halftime show, sponsoring the big game's musical performance at halftime. the financial terms were not disclosed and the company also bought 60 seconds of ad time during the big game. that game has seen record ratings for the past three years. i'm surprised it's only 60 seconds. i bet they buy more than that before the super bowl comes around. pepsi last sponsored the show in 2007 when prince performed.

bridgestone tire sponsored the show after that. tomorrow morning pepsi's cfo will be joining us on a first on cnbc interview to talk about earnings and the deal with the envelope. if you have comments, questions about anything you see here on "squawk," shoot us an e-mail squawk@cnbc.com and follow us on twitter twitter, @squawkcnbc is the handle. coming up, businessman and billionaire donald trump will join us and laters, domino's delivered and ceo patrick doyle will come on talking about how his customers are dealing with the sluggish economy. stay in the moment sanya.

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we're back on this tuesday morning. rupert murdoch's former boss rebekah brooks and andy coulson will be charged with phone

hacking offenses. >> over a year ago this first came to a head. in the meantime the police, scotland yard have been going through the evidence and launched a full scale investigation about a year ago, they've been collecting evidence and finally about a month ago handed this evidence over to the crowned prosecution service which is the body in london which actually has the authority to charge people, so what we're seeing today are charges that have come out of basically a year-long police investigation and what we've seen are eight individuals charged, these include rebekah brooks, not only the former chief executive of news international, she was former editor of "news of the world" and editor of "the sun." andy coulson was most recently david cameron's press guy, and so cameron's come under a lot of flack for hiring him in the first place. we've also seen 18 charges brought against these individuals, in addition to the overall charge of just

conspireing and allowing the practice of phone hacking to happen. rebekah brooks was also charged with playing a role in the hacking of millie dowler's phone, because dowler was a murder victim, it upset her parents and said brooks is playing a role in this and she's already charged remember with conspireing against justice for apparently lying allegedly lying under oath to politicians and regulators in her earlier testimony, she's come out against those charges and she put out a statement today, and i want to make sure we get this statement out there, "i'm not guilty of these charges. i did not authorize nor was i aware of phone hacking under my ed moreship. the charge concerning milly dowler is particularly upsetting not only as it is untrue but also because i have spent my

journalistic career campaigning for victims of crime." she will appear in september to defend these, the latest in three ongoing investigations they have open here. >> thank you, kayla. >> jump in right now, at&t earnings came out as you were talking. look at some of the numbers, 66 cents a share is what at&t is reporting, better than the 63 cents the street had been expecting, they also talk about consolidated revenue of $31.6 billion. expectations were $31.7, pretty much in line with expectations. some of the metrics people look for wireless margins, the company saying highest ever wireless margins, operating income margin of 33.3%. ebitda service margin of 45%. they go on to talk about a few of the numbers in terms of churn. they say the best ever post paid, prepaid and total wireless churn, post paid churn dropped to 0.97%. we heard similar things from verizon in the earnings season when that company reported, too, with verizon the fios

subscription numbers caused trouble there. what you could see now is at&t a dow component is indicated higher after reporting these numbers, closed yesterday at 35.38. the bid is 35.70 and the ask is 35.90. so we'll keep an eye on the numbers as they go through. so far today, two dow components, dupont and at&t beating expectations. earlier it was too early to see what would happen with the pod shares, the bid/ask is too wide but at&t shares are indicated higher. >> i'll start looking through that press release. one of the other things people look for ultimately and i don't have the numbers on me is iphones and what that means to apple stock, which of course we're going to get their earnings later today but sometimes it can give us an early indication. >> good question. i didn't see that number when i was skimming through. i'm printing the release right now. we can continue to go through it. >> we'll come back to that in a moment. >> they give smart numbers. i don't know if they break out

iphone numbers. >> there it is, 3.7 million activations in q2 for the iphone. that is actually in line with estimates, and in fact, some people had thought it might come down a little bit, so that's probably going to be good news. i don't know, can we take a quick look at apple's bid/ask this morning? >> i'll call it up right now. >> in just a second. >> again, what was the number? >> 3.7 million. >> apple indicated slightly higher, closed at 603.83. turned back down as i said that, 603.71-47, that's a widespread. in the premarket it's up by 17 cents. earnings season is in full swing. later this week a gauge on the health of the economy with the release of the second quarter gdp numbers. joining us is donald trump, on the line, president of the trump organization and donald good morning. >> good morning.

>> i want to start with real estate prices, there was a "wall street journal" story today saying that home prices in the second quarter actually rose very slightly, but rose for the first time since 2007, and you're the real estate expert. have we peaked? have we hit a bottom with these numbers with real estate and do you think we're on the better numbers to come when it comes to residential real estate? >> i think we have. you can look at places like new york which are actually at highs and could you almost say all-time highs. miami is doing unbelievably well. there are cities that have come back fully. at the same time there are a lot of great deals out there. people will ask me what should i invest in? i say go buy a house because the fact is it's a great time to buy and i believe strongly prices are going to be going up. they were a little up but i believe they'll be going up substantially over a period of time. >> what do you think is driving things? is the economy starting to look better? have we worked off a lot of inventory out there? >> the prices are very cheap and financing if you can get a bank,

financing is fantastic. i said for a long time the best place to buy a house is from a bank. the banks are dying to sell you houses and if they sell you a house they'll give you great financing. >> financing is tough for a lot of people, though, donald. has that improved? >> financing is readily available for people that are rich, for people that don't need it. if you need it, you cannot get financing. i have friends that are good businesspeople, they're wonderful people, they have great jobs. they can't get ten cents. if you don't need it, you'll get it for very little money. >> when we look for the gdp numbers later this week, you're right, the economy has been in trouble, we're worried about what we see come out of europe as well. what are you looking for, for the gdp number the end of this week? >> europe is really, you know, nobody knows what's going on with europe. i even saw today where germany is going down for the first time in many years. i've seen that and of course they're supporting all of europe, so you don't know -- i think a lot is going to do with what's going to happen with the

election. we're in a very standstill position right now, not a lot is going to happen until after we see the election. i think a lot of good things can happen especially if the right person gets in, and the right person happens to be mitt romney. >> donald, watching the deals yesterday, i'm not sure if you saw the news cnooc is buying nexen. it was looking to buy unical seven years ago, they got chased out of town and told forget it. now they're making a big play in canada, and buying the natural resources there. and i just juan wonder what you think about this. were we right to push cnooc out last time around? >> well, look, we are treated like babies by china. china plays the system much better than we. we invented the system but china learned how to play it better than we do. their leaders and politicians are a lot smarter, the people leading china, what they're

doing is incredible, the way they manipulate the currency and they go into canada and lots of other places and buying phenomenal assets but i remember a long time ago when japan was coming into new york and buying all the real estate, and everybody was worried. nobody got beat so badly as japan. so let's see what happens, but china is spreading their wealth and doing it brilliantly and buying lots of assets from lots of countries and the biggest patsy of all is the united states. >> donald, want to talk about banks. jpmorgan and jamie dimon last friday buying $12 million of his stock. would you buy stock in american banks right now? >> i would especially if it's run by jamie dimon and jimmy lee who people don't realize he's an amazing international banker and he brings numbers to this country and deals to this country that not only create tremendous wealth for our country but tremendous numbers of jobs. so when you have guys like jamie dimon and jimmy lee at a bank

you have to invest and they've done a fantastic job at jpmorgan chase and i thought jamie handled the difficulty of a few weeks ago very, very elegantly, not an easy thing to do. >> does that mean that donald trump is buying jpm right now? >> i haven't thought of it but you are my broker, you know that. i get all minus from you guys. >> as you said between jamie dimon and jimmy lee. >> i think i'll go out today and buy some stock, you're right. >> donald, have you bought other stocks recently? a few months ago you told us about stocks you were interested in but real estate takes a lot of your focus. >> i bought a big amount of stock about a year ago and they're slightly up. i wouldn't say i'm getting rich. i like real estate much better but i did buy some stocks but i think you gave me a good idea for one today because it seems to be the right price. >> donald, who is your banker right now, is jimmy lee your banker? or he should be maybe. >> absolutely, jimmy lee is a banker although he likes the huge, huge international trades,

and ace greenberg is a banker of mine and i have a lot of different bankers, a lot of people telling me how to invest my money. usually i just do it myself but i have a lot of advice, a lot of people calling. interesting, when you have money, everybody wants to take it. it's very interesting phenomenon. >> jeremy siegel has a question for you. >> good morning, donald. >> how are you? from my alma mater, we're proud of you. >> thank you. i want to pick up on your statement about housing getting better. >> yes. >> because we see it in all of the statistics, nhp, the housing starts, becky mentioned about the prices firming for the first time. it's the most important sector to our economy, and if we are seeing a rise in that, you know, as weak as everything else is in europe and all the other problems, i just don't see our economy going down. just moving up from that, i think a most significant story probably of the last two months

is the fact that the housing sector is finally beginning to move, and that's going to be a positive contribution. we're talking about gdp. the number for the second quarter is going to be bad, 1% to 1.5%. if we get moderate improvement in housing, we're not talking about back to the days of 1.5 million starts. we're only half that now. that could contribute 1% to 1.5% per quarter over the next two to three years so i think that is an important support, just like that was i think the biggest cause of the recession, and the crash that we have, it's going to be supportive on a recovery. >> it's very interesting what you say because i used to state years ago when i'd make a speech i'd say the biggest industry in this country is housing, and people wouldn't know what i'm talking about because you have the little home builders all over the place, but when you add them all up they're bigger than cars and they're bigger than banks and bigger than anything and it really is, but i definitely see a massive change.

i see people now going out and really sort of stealing houses. you can buy them for a steal, and when you look at cities and you've seen this, jeremy, when you look at a place like miami which was two years ago being laughed at, it's probably the hottest city in the world right now so buy housing. you can't even get it. all of the thousands and tens of thousands of condos of houses that were built are just being gobbled up. miami has -- in fact i made a big investment recently in buying doral, 800 acres in the middle of miami and it's been phenomenal. >> internationally we're about the cheapest in the world, you go around the world and look and hey, american real estate, the affordability indices are at all-time high with mortgage rates low and prices, even the economist magazine, years after years talks about the housing bubble, said the u.s. real estate is 15% to 20% below underprized on the basis of our rental price ratios. around the world, and on an

absolute basis, really, you know, i mean that's where it's at. debris, that's very cheap but i see, you know, more important, i think you're right about the investing side, if you can get some of those good deals but i see it as a tremendous support to the ongoing economy in the next two years. >> i agree with you and i think it gets better. i don't think it's going to be quick but i do think it gets better. some places are doing well. some places are not doing so well, but i really see a big up for housing and most importantly if you're looking to buy a house, this is the time buy it. you can make a great deal. >> donald, i want to thank you so much for joining us this week. we have more things we want to get to but we will talk to you next tuesday. >> very good. >> thank you. >> thanks, donald. coming up senator chuck grassley introducing a new bill to crack down on wall street violations, why the proposal will help investors. keep it here for a lot more after the break.

domino's is looking to deliver. the company's ceo talks earnings, the consumer and commodity prices right after the break. you want to save money on car insurance? no problem. you want to save money on rv insurance? no problem. you want to save money on motorcycle insurance? no problem. you want to find a place to park all these things? fuggedaboud it. this is new york. hey little guy, wake up! aw, come off it mate! geico.

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domino's is out with earnings beating estimates on the bottom line and declaring a special dividend of $3 per share. joining us to discuss the results and the outlook is patrick doyle, ceo of domino's pizza. good morning to you and thank you for the delivery this morning. i now have some pizza which i don't know if we should be eating it at this hour, patrick. >> absolutely. it's breakfast of champions, andrew, i'd dig right in. >> you'd dig right in? >> let's talk quick you did beat on the bottom line, missed on the top. explain that to the viewers if you could. >> actually if you look at same-store sales growth we have global momentum. we were up 5.7 on same-store international, 1.7 domestically. the revenue for us, we have a big distribution system if commodities are tamed, their sales out to the stores will be down. that's a net positive. the other effect on revenues is the dollar, the strong dollar,

certainly hurts the revenue line, but if you see the way it flows through on earnings, we had a terrific quarter, i'm very happy with where we are, the momentum continues to be strong. >> strength in the consumer right now? >> well, you know, i think in the u.s. it's fine. obviously the big concern has been europe, and we're doing very well in europe. the uk released yesterday up over 5% same-store sales in the first half. we're seeing some weakness in dprooes but for the most part europe continues to hold strong for us and we'll take up 5.7 on our international business. >> patrick, we just had scott sperling from boston talking about bain and pizza and bain is still an investor in the company. >> they're actually out, about two months. >> they are completely? >> yes. >> your company has about 1.5

billion in debt and in part that was a function of a special dividend paid in 2007. how do you think about that? how much more complicated is it for you as a ceo to deal with the debt, was it the right decision to do that when it was made and that is the criticism people argue of private equity despite this being a tremendous success story. >> bain capital was a fabulous partner for us, a terrific relationship and the decision on our debt level is something that bain at some point controlled. we did a refinancing and upped our debt. the lack of business given the volatility and low capex expenditures. it's right for the capital structure of this business so absolutely. >> before we let you go, papa john's pizza, what's the market share look like and how do you

think it will look like in 12 months? >> i think the important thing is that the nationals are gaining shares from the smaller players, the category getting better, seeing some growth of 1% or 2%. we've been dominating in digital and the big player is going after that, that's driving some share gains from the smaller players. >> okay, patrick doyle, thank you for that and thank you for the pizza. i appreciate it. >> absolutely. >> very much. you should never eat on television. >> let's talk about u.p.s. numbers out and down by $2.50 and the bid/ask, ups came in earnings of $1.15, versus the $1.17 the street was looking for. revenue $13.3 billion versus the $13.7 billion the street was looking for and the guidance is the huge issue for the fiscal year they expect to earn somewhere between $4.50 to $4.70 a share.

the street was already at $4.83. u.p.s. is blaming this on problems around the globe, citing increasing uncertainty in the united states, continuing weakness in asia exports, and the debt crisis in europe, they say they are all impacting projections of economic expansion. this is the three points we certainly talk around this table about all the time, the slowdown in china, what's happening with politics in the united states, and uncertainty that it's created in washington and the debt crisis in europe, all three of those issues seem to be impacting u.p.s., at least that's what they're blaming the problems on. the stock down by close to 3.5% so we'll keep an eye on it as we get closer to the open of trading today as well. when we come back, more firepower for the se krerks. are bigger fines needed to deter bad actors on wall street? senator chuck grassley is here to tackle this issue. stick around. "squawk" will be back out.

he

. a newly introduced senate bill the sec's act would impose harsher fines for misconduct on wall street. joining us is one of the authors of the bill, senator grassley, and senator, what would this bill do? >> basically simple principle, if you tell the sec you're going to do something or stop doing something you're doing that's wrong, that you're going to keep your word, and we've had studies that have shown over a 15-year

period of time, 19 firms broke 51 different agreements that they had with this security and exchange commission. also in the process, we want to get the security and exchange commission's attention that they aren't doing an adequate job of enforcing the law, but maybe the penalties aren't enough that the penalties almost become a cost of doing business, and they really aren't considered a penalty or a fine. >> we've seen some judges who have gotten a little more activist with this, who have pushed back and said that they want to see tougher fines, too. i would guess that this is something that easily got bipartisan support on both sides of the aisle? >> yeah, senator reed, senior member of the banking committee, is a lead sponsor and bipartisan bill. >> senator part of the big issue is increasing the fines that individuals would pay as well because when a company pays, it's not money that comes out of the pocket. >> that's true, gets back to

something i just said, the cost of doing business but also, if the fines are so low that you can keep on violating and violating and violating, we want to increase those penalties so that when you are caught doing something wrong, you're going to stop doing it or when you agree to something with the sec, you keep your agreement. >> jeremy seeingle is osiegel i our guest host. >> i want to congratulate you on a bipartisan law passed. i don't think anyone knew that was possible up on capitol hill. i think compromise is still very possible, and i congrat lay yulu on that. >> there's more of that than maybe what the people see on the tv tubes, but maybe not enough of it, and more partisanship now than should be obviously. >> senator, we want to thank you for bringing this important issue to our attention this

morning. thank you for your time. >> you bet. thank you very much. glad to be with you. when we come back we'll have reaction to u.p.s. earnings, those numbers just out and they are disappointing. "squawk" will be back after a quick break. also kneel caneel kashkari will joining us as well. d decisions. duff & phelps financial advisory and investment banking services. zagat just gave hertz its top rating in 15 categories, including best overall car rental. so elevate your next car rental experience with the best. it's just another way you'll be traveling at the speed of hertz. olaf's pizza palace gets the most rewards of any small business credit card! pizza!!!!! [ garth ] olaf's small business earns 2% cash back on every purchase, every day! put it on my spark card! [ high-pitched ] nice doin' business with you! [ garth ] why settle for less?

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quarterly results from at&t and neel kashkari on the equities that will slow growth. >> iq business ethic. >> it coincides with the ten-year anniversary of the sarbanes-oxley reform law. >> the ethics of, ugh, business, can be summarized in, ugh -- >> third hour of "squawk" starts now. ♪ >> welcome back to "squawk box" on cnbc, first in business worldwide. i'm becky quick along with andrew ross sorkin. joe is off this beak.

our guest host is a "squawk box" market master, jeremy siegel, finance professor at the wharton school. more thoughts coming up from him and watching u.s. equity futures. when first came in futures were indicated lower. right now they still are, dow futures down by 38 points, comes despite better than expected numbers from at&t and dupont, both dow components. we'll have more with all of the numbers coming up but really it's what's been happening in spain with some of the spanish yields that has people concerned. >> let's get you through some of the global headline this is morning. spain's short term debt costs are continuing to rise. spain paid the second highest yields in the euro era in selling $3.7 billion worth of three and six-month t bills and the five-year yield now going above the ten-year, that's the first time that's happened in 11 years. treasury secretary tim geithner has a warning for german chancellor angela merkel, don't push too hard for austerity in

return for offering support to struggling economies. take a listen. >> if you leave europe on the edge of the abyss as your source of leverage your strategy is unlikely to work because you're going to raise the ultimate cost of the crisis much more expensive to fix and you're going to, you do a lot of damage to the politics of those countries because of the human costs of what's happening not just in greece but across europe now, are enormously high and you're seeing that reflected in much more political extremism. >> european equities at this hour, you can see, i don't want to say a mixed picture, all you have the green arrow in greece which never makes too much sense, red arrows almost across the board. mitt romney is taking his campaign overseas, the republican presidential candidate will be shifting his focus to foreign policy with a major speech at an overseas trip to three countries. today he'll be addressing a veteran's foreign wars conference and then visiting the uk, israel and poland, of course this all comes on the heels of the olympics, which begins later

this week. several major companies are reporting this morning, we've talked about a couple of them. dupont reporting earnings of $1.48 per share, that's two cents above expectations, revenue did come in slightly short of expectations, and that's a story we keep hearing over and over again. u.p.s. reporting a quarterly profit of $1.15 per share, two cents shy of estimates, revenue light and the delivery company lowering full year forecast citing economic uncertainty in both the u.s. and europe. we'll hear from an analyst who covers that company in just a few minutes. keep your eyes out on that stock today and at&t is out with second quarter results in the last hour and here is james ratliff from barclays. they're beating on the bottom line but light on the top line. >> the wireless business

continues to be strong, margins well above our forecast mainly because of lower customer churn and particularly lower upgrades as fewer customers got new handsets so the company had to pay out less in subsidies. >> a lot of investors look at at&t in part to try to understand apple, and what's going on in that space, which we're going to hear their earnings later this afternoon. there were 3.7 million iphone activations. is that surprising to you? i ask it only because verizon had about 1 million less and that was a real sense i remember in the market only a year ago that once you opened up the exclusivity on the iphone it was going to change the business completely. >> it doesn't really surprise me that at&t had such a larger base of iphone customers and iphone customers tend to upgrade to new iphones and in addition, verizon's case since they have the lte network which is attractive and the iphone doesn't work yet on that network, tilts more of their customers taking android based devices. >> what is your target on at&t?

>> $34. >> is that changing based on what we're hearing this morning? >> can't comment on that. >> worth a try, right? >> absolutely. >> in terms of understanding what to worry about going forward, do you think we're -- the lightness on the revenue, is that something thatcern you? >> not particularly. particularly wire line revenue was a little bit light but the wire line business is still tough. they've got a declining voice business and the enterprise business on wire line is the most macro linked of any part of their business, so it came in a little bit light but not too concerning. >> what about margins? again, they have the highest margins they've ever had, but at some point, don't the margins have to get compressed? >> margins certainly are seasonal and they're in the wireless business clearly linked to product upgrade cycles, and we're in a lull at the moment, back when 4s, and presumably a new iphone coming in 4q 12 so

you're seeing lower activity. >> what about capital investment, still spending money to build the towers. >> absolutely, investing heavily on the wireless and to a degree on the wire line side. capex came in for another quarter below what we forecast. >> is that sustainable, given the concerns about broadband and how much band width is ultimately going to be out there? >> i think the current levels of capital intensity remain largely unchanged going forward, this is a capital intensive business but i don't think it becomes more of one. >> james ratcliffe thank you for joining us this morning. >> thank you. our next guest downgraded u.p.s., has a $65 price target on the stock. don broughton, avondale partners. what did you see coming? you had the right call? >> thank you, becky, good morning. when you look at what's happening in the mac macro environment and look at

u.p.s.'s weighting in the international business in europe in particular we thought it was obvious there would be bigger headwinds than the company would be able to meet and maintain earnings guidance. >> u.p.s. laid out the things we talk about all the time, talk about uncertainty in the united states, continuing weakness in asia and debt crisis in europe, but is this something that the headwinds themselves are causing or you think this is a u.p.s. specifically how it's dealing with those problems? >> i think u.p.s. did a really good job of dealing with these issues but bottom line when you look at the international package business in europe, it was down over 3% in volume, pricing was down over 5%. you can't face those headwinds when that's 14% of your revenue and still bring the bottom line number home. >> what do we do from here? you're staying away. that stock is at $75, even with the news this morning, even with the trading down, you're looking for it to drop to 65. why? >> we're seeing the stocks rated

for a bigger premium in valuation to fedex, bigger premium in valuation to the s&p than we've seen in quite some time and we think it's unwarranted, given the headwinds it's facing, one. two, you got to understand that 14% of their revenue is coming from europe, and they are in the process of completing an acquisition of tnt which will double their exposure to europe so they're doubling down on a bet on a economy that's decelerating, doesn't bode well for the stock in the short and intermediate term. >> how does fedex compare? >> we're more favorable. 7% of their revenue comes from europe, certainly they have exposure there, and europe is the largest export customer for the united states. that said, being much more euro centric and much more technology and industrial driven makes us more favorable on the shares of fedex given they're trading at a severe discount to the shares of

u.p.s. >> down another 2% in sympathy with what they heard from u.p.s. you'd be telling people to buy? >> yes. in short term the two stocks understandably trade in sympathy with each other but over the longer terms they take a divergence as the performance of the companies dictate after all not all transportation companies are created equally. >> what is your price target for fedex? >> i believe it's $110 a share. >> wow, you've got room to run still. don, thank you very much for joining us today. we appreciate your time. >> my pleasure. >> good call on that, don actually downgraded shares of u.p.s. before that news this morning and shares are trading down significantly this morning. when we come back on "squawk," it is the law that introduced major changes to the regulation of financial practice and corporate governance, ten years after the adoption of sarbanes-oxley. we'll talk to former congressman michael oxley about the impact of the law and surprising new survey on ethics. in the next hour, we'll be

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welcome back to "squawk box," everyone. we've been watching the futures and they have a little lower this morning, dow futures down by close to 35 points, the s&p futures off by 4.5 points. concerns out of spain are still ruling the day, the spanish ten-year and the five-year yield have been closely watched this morning because the five-year yield is higher than the ten-year at this point. let's talk about sarbanes-oxley, the ethics resource center has some disturbing news on the state of workplace misconduct in some of america's most powerful companies. the timing of the survey coincides with the upcoming ten-year anniversary of the business reform law sarbanes-oxley. joining us now, mr. oxley, michael oxley, former u.s. congressman and chairman of nonpartisan nonprofit ethics resource center. let's go through the results of the survey but more importantly ten years later, what do you

think of the law that you created? >> well, i think it's stood the test of time, we've never had a systemic failure like with enron and worldcom and some of the other businesses that went bankrupt early in the 21st century so i think in that sense, it's been effective. the key now is the resource center in the study that we've done on the fortune 500 companies and how some of the success they've had and some of the failures they've had and what we'll concentrate on in that report. >> congressman, you think back ten years later, do you think that the law was too backward looking? i say it in the context that obviously while we haven't had another enron or worldcom, in that respect we also have the financial crisis, and in large part people would suggest that was about mismarking of numbers, different valuations, things like that. >> no, sarbanes-oxley was really

about accounting, and it really didn't have anything to do with the problems we've had in the last few years in the financial community. they're two different things and two different approaches. >> and one of the criticisms or critiques of the law i hear often among small businesses and big businesses is the cost. everybody says it just cost too much to comply and that ultimately it doesn't change the outcome. what do you say to that? >> it does change the outcome. the idea was to restore investor confidence in companies they were worried about and i think that's had a major effect. the costs have receded a number of years now, the recent study by the center indicated a 30% reduction in cost between 2006 and 2008 and those numbers keep coming down. i think it's true there was the initial costs were not in line with the expectations, but i

think over time we've adopted to that. the point is now we have a strong ethical compliance measurement in corporate america and i think we're starting to see good results from that. >> i don't want to be dismissive about it at all. the ethics element of this is crucial, but i'll give you an anecdote, i was talking to a board member of a small company, publicly traded, they spent about $4 million a year on compliance and they said look, we actually had to let go, we had to fire some of the people who answered the telephones for us literally to comply. how do you resolve that for yourself? >> i don't know the particulars of that but a lot of others have adopted the higher standards, set a good tone at the top and are doing exceptionally well, so i don't think we can take one particular case, i don't know

what their revenues are or market cap is. the idea was to provide more transparency and accountability in the public markets and the fact is we've not had a systemic failure like enron and worldcom and the investors feel much more comfortable having those in place. >> professor jeremy siegel is on the set and has a question. >> good morning. >> good morning. . >> a recent article in the "wall street journal" shows the compliance costs per employees afive times greater than for the large ones and i think, most of that increase over the last ten years was sarbanes-oxley. do you think there's some way they could modify the costs to be lower on the small businesses? the law is very much applicable i think and done a good job for the multibillion-dollar

businesses but what about the small irbusinesses? >> congress passed the jobs act which start-up companies now will be relieved of some of those costs but more important the sev addressed some of the issues and continues to do that along with the bcob in getting a more scalable approach, more of a top-down kind of an approach. it was done under chris cox's leadership. that is a positive thing in my estimation. it was encouraging to show costs overall have been reduced by some 30% from the original cost that went through. >> congressman, i know you say what happened in the financial crisis is a little different than what sarbanes-oxley set out to try and define. another congressman was surprised no one was prosecuted under sarbanes-oxley because he did think there was a case particularly in some of the

financial companies if you look at lehman or others saying that they weren't living up to what they had told us or signed off on when it came toment so of the accounting standards because of precisely that reason, just finding the marks and marking them fairly. have you been surprised it hasn't been used? >> not particularly. i think clearly the justice department felt that they had the necessary evidence they would have gone forward with prosecutions, and i just think that there was a case and this was an excessive risk, a lot of different things, but in terms of accounting fraud, the justice department found at least at this point found nothing to indicate that there was that kind of fraud going on. >> but if the goal of sarbanes-oxley was to restore investor confidence, if you go through the financial crisis of 2008, no one is prosecuted, how does that leave investors feeling any more confident about being protected? >> again i think we're talking

apples and oranges here. in terms of clearly doctor -- >> that's fine, forget about the sarbanes-oxley, you come through as an investor and see what's happened, how do you have any faith? >> that is true, the individual investor has had some body blows, beginning with enron and worldcom and up to the present time insider trading, the libor problem, all of those things i think have been reflected in the fact that individual investors are very, very wary of the market now and that's unfortunate, because that's really the bedrock of the capitalist system. >> so congressman, if you were back in washington, and you could either update your law or write a new one, is there something you would do? >> well, no slaw perfect. i would have initially more of a scaled down provision that would have had, treat smaller companies different than the larger fortune 500 companies, but in many ways though we gave the flexibility to the sec and the pcob and they've used it

somewhat and maybe there's an opportunity to use more of that to make it work even more effectively. it's a process. it's been ten years. obviously there's some changes that are necessary, but i wouldn't want to go back and try to redo it. i think that would be impossible but i think the regulators have more of an outlook and the ability to make those kind of changes necessary. >> congressman, before i let you go, i want you to react to a different survey this morning. we talked about this on the show i think about a week ago, there was a survey by a law firm that represents investors and whistleblowers and the survey came back that 24% of wall street workers who participate in the studies said they believe that unethical or illegal behavior could help people in their industry be successful, and in addition, they said 26% of the respondents said they observed or had firsthand knowledge of wrongdoing in the workplace. have we really come that far after all? >> well, i mean, it depends on how you look at our survey, for

example, national business ethics survey would indicate that for example 13% of the reporters talked about foreign practices act violation, that is a clear case of obviously bribery that you can quantify. so those kind of things continue. you're never going to get a perfect kind of a system. people will try to gain the system for their own advantage. the idea again is to have more transparency out there and more accountability but you're never going to get to 100%. >> michael oxley, thank you for being here on this ten-year anniversary of sarbanes-oxley. >> my pleasure, thank you. >> thank you. when we come back, pimco's neel kashkari on the global economic slowdown and talking about future fed action, potential for that and resilient stock picks for your portfolio, plus some badly needed rain is expected in parts of the midwest, but will it be enough to save the corn and soybean crops from the scorching heat?

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welcome back to "squawk box." new poll suggests global cocoa prices could find support in the next year. supplies falling slightly short of demand. we'll see how that plays out. walmart is calling on retailers to reject a proposed

$6 billion credit card swipe fee settlement. visa, mastercard settled the card tried to fix fees for accepting credit cards. walmart is arguing this does not restrict credit card issuers from continually raising the fees that merchants have to pay when shoppers use their cards. andrew? coming up, we're going to talk about finding value in this global slowdown, pimco's head of global equities neel kashkari will be bringing us his forecasts for earnings and picks for your portfolio to weather the economic storm and relief in site for corn farmers? cnbc's jane wells will be joining us from iowa with an update on the corn crop and a closely watched weather report after this. [ male announcer ] let's level the playing field. ing

ing. welcome back, everybody. rupert murdoch's former newspaper boss rebekah brooks will be joined with phone hacking offenses. the ex-media chief and six other former "news of the world" journalists and staff are also to be charged. keep an eye on shares of u.p.s. today. the companies earnings and

revenue falling short of expectations. the shipping giant is also cutting the full year view. it's now talking about a much lower number than the street had been anticipating. it's citing increasing uncertainty in the global economy, and you can see right now that is going to take quite a bit off the stock. the bid is at 75.10, ask at 75.22, after the stock closed at 77in' 77in'.75. >> neel kashkari, your he always in the right place, managing director of global equities. mr. kashkari, given what we're seeing out of spain, this idea that the five-year is crisscrossing with the ten-year, how anxious are you right now? >> well, we're very concerned about what's happening in spain. clearly they are financing at unsustainable levels, their economic model is broken right now, they absolutely need a lot of help from the ecb, from the imf and we're all waiting to see what policymakers are going to

do. we think beck wit investing today, the big left tail risks are out there, whether it's europe and spain or the fiscal cliff at home, the right tail, the positive thing we're wait something for actions from policymakers, the ecb dealing with spain or the fed coming out with qe3, either good for risk prices and equity in general. >> how are you handicapping all that? we know what should happen. what do you think is going to happen? >> what is going to happen is that policymakers in europe will continue to use duct tape and band-aids to buy time and avoid making hard choices. they've done it now for two, two and a half years. i think they're going to continue to try to do that. the challenge is, each of their half measures is becoming less and less effective, and their ability to buy time is slowly eroding. >> i think you're wrong, neel, i don't think they're using duct tape. duct tape works. it's all band-aids, i just want to make that point. >> and, and the duct tape franchise goes all the way to the fed because they're not doing anything that's more or

less duct tape than europe! i mean, we talk about europe like wow, they're not doing a good job. none of this is working. they're not doing much different than ben bernanke. you know, as a matter of fact, their end game is to be maybe more like him and have more quantitative easing. i have one point to raise with mr. kashkari, 7.5%, there were many years, many years in the u.s. we funded our long end at that or higher rates so really, it isn't the 7.5% that's the problem. the problem is insolvency, is it not? >> well, you're absolutely right but i think the two go hand in hand, it's economic growth and based on how much debt they have and whether they can afford to finance and service their debt at these levels. right now they clearly cannot do that. >> do you think that's a question we'll be asking ourselves in a few years, sir? >> it's a real question. we need to tackle our long-term fiscal challenges. >> how many commercials for either party or the current

administration do they do anything but sweep that possibility that the difference between the u.s. and europe, the joke on this floor is, oh, about six years. that's the punchline. >> well, again, look, i agree with you. we absolutely need to tackle these challenges. >> why do you keep saying the federal reserve has to do these programs? you're a very smart man. do you really think that's the solution we need? >> well, we don't actually think that qe3 is going to lead to long-term sustainable economic growth. >> then it's a dumb idea, right, fourth time around? >> it's not a dumb idea. what we think is that the legislative branch and the executive branch need to come together and make long-term fiscal adjustments. >> why? i like those conservatives saying no because they're saying no to more debt which you just said a minute ago was the problem in europe. >> but rick, you want to keep having no resolution in washington and wind up where you've got companies blaming washington for this? >> i don't want a compromise so

the 5:00 news could say, wow, boy, kumbaya, both sides worked together. forgetting the fact that the deal in absolution is bad. >> you're forgetting 1986, ronald reagan and tip o'neill coming to a compromise so that you did see reform. >> did they ever stop spending? they never stopped the spending. i want to see real spending cut. you know, here's what we currently do. >> rick, short of incompromise you're going to go off the fiscal cliff. you'll get those -- >> come on, we're already down the fiscal cliff. we're already down the fiscal cliff. >> hold on, rick, you think if we go over the fiscal cliff that's all right? >> what are you worried about in fiscal cliff, tax policy? come on, andrew, of course they're going to work it out. >> you're suggesting you don't want them to work it out? i'm unclear what's going on here. >> i don't want to have spending cuts that have a trigger that isn't right now. ronald reagan fell for it, we'll

spend today and cut later. never has worked. that promise has never been delivered. we need pro-growth policies and spending cuts right now. the taxes, why would you give any of these people more tax money? we live in a society where they're banning people paying anything back. oh, students don't need to pay back, mortgage holders don't have to pay back. i don't want to pay and neither do many people down here, we've said it before and who is the government to say that i have to share a sacrifice for people that signed a dotted line and now regret it or parents, you know, some of us parents saved for our kids so the ones who took out are forgiven? >> in terms of saving and being cautious and in terms of not violating the things but that doesn't mean i don't want to see our fiscal deficits taken care of. >> i don't think anything we're talking about to be done in this administration does anything in regard to take care of it! you keep talking about band-aids and duct tape in europe.

it's the same here! >> what about simpson-bowles, what do you think about the simpson-bowles proposal? that does take some -- >> it would have been good at the time, another example of the government leading by horrible example! they had a chance to play that hand of cards. you can't go back now. >> you can, it's actually -- >> whether it's student mortgage or -- >> simpson-bowles is coming back. >> oh, god, we went through a whole mid summer process, we don't trust them. >> from what you said, would you not sign for it. >> we had the treasury secretary on, he goes we can't afford the tax cut for the people in business which we've called the upper percent isile because it l cost a trillion dollars over time, we're spending more than $1 trillion every single year right now. >> simpson-bowles talks about $3 of spending cuts for $1 of revenue increases.

>> i don't believe this congress can deliver on it even if this cite it. don't believe it and neither do most americans. >> let's bring receive into the conversation. >> sure, i'm done. >> no, no. you had two points you wanted to make? >> i did. first on what rick is saying, it is interesting that the market doesn't seem to share the concern right now about the deficits. that's what's clear. >> look at the ten-year. >> because rates are low. that's a lie! that's an outright lie saying the low interest rates lose confidence -- >> i'll give you a chance to take that back. >> i didn't say steve's comment is a lie. i said that comment was a lie. quit being so sensitive. >> i'm not sensitive, i'm not crying. >> i'm not saying it's a lie. >> somebody is and it wasn't me. >> he's saying the fed wasn't involved in the market. it's interesting to think about -- >> low rates. >> where the market would set the rates in the actions of the

fed being involved, it strikes me that you could make an argument that the fed withdrawing from the market would cause rates to decline in part because the market anticipates help from the federal reserve, that's the first thing. the second thing i want to talk about is what's happening right now the euro. i don't think we're giving that enough thought right now. what's happening with the euro coming down to 120, that's something that essentially hurt the united states and i think there's questions about policy here and how much -- i wanted to ask the professor about this, one of the bright spots of the u.s. economy and there have not been many, has been the export economy. now europe's going to allow this euro to depreciate, it's against the dollar. >> right. >> it's going to hurt our export economy so essentially what's happening once again is the world is rebalancing on the back of the united states. should policymakers allow that to happen? >> first of all the u.s. is the strongest of the major economies, japan and europe and

our exports to europe 20%, 25%, i would accept a reduction in our exports to europe and the competitiveness there to get europe back, and i think getting down to $1 a euro gives europe a chance to get back. >> i'll thank steve and also rick because we are going to take a quick break, we're going to take a slip and a break. mr. kashkari will come back also and talk a little more equities after the break. when we come back, jane well also join us from the iowa farm bureau's economic summit. we'll head to the futures pits for a look at how commodities traders are playing the spread as well. ♪

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welcome back to "squawk box." the dow would be off about 38 points if we opened up right about now. let's get back to that conversation with pimco's neel kashkari. a majority of companies beat expectations on the bottom line but increasingly light on the top line, raises the questions about the sustainability of where we really are. >> you're right, expectations came down aggressively over the past couple of months as we saw more and more data come from around the global economy, seen

a synchronized slowdown, bleeding into corporate profits but as companies have done for the past couple years they've been resilient in trying to maintain their margins, that gives us cautious optimism. absent the tail risk we're talking about with rick, and i love his passion that he brings to the program. the tail risks of either the fiscal cliff on the one hand or the european situation on the one hand or qe3 on the other hand absent the tail risk i expect to see equities tread water or come under pressure as the global economy continues to slow. this is a market where the tails are going to dominate the mean more than the other way around. >> okay, so that raises the question, are you more worried about the train missing the station or the train going backwards, i heard this last week if you're thinking we're at some bottom they say it's not so dangerous to jump out of the basement window, the question is, is it the basement window or are you ten floors up?

>> we're being cautious. we've been cautious as we've been investing in equities, frankly, for the past couple of years as the european crisis continues to burn along. we try to buy names we think are more resilient against some of the downside scenarios, whether it's a slowdown in the global economy or the big macro risk we' we're focused on. the big questions are what are policy makers going to do, when are they going to do it and how big. in the case of europe, is the ecb eventually going to go all in? how big are they going to go and the same thing with the fed with qe3, are they going to do it, when and how big. >> i know you're an equities man but i have a bond question for you which is the ten-year, i was literally on the phone trying to talk to refi my mortgage with my guy russell pfeiffer. do you think it's going to lower from here? is that possible? >> it is. look at what's driving the

ten-year where it is. the fed is being the marginal buyer or more than the marginal buyer so the market is not freely set by the marketplace, the treasury market. we have the flight to quality. everybody is worried about what's happening in europe and number three the risk of a deflationary shock coming out of europe, pushing the ten-year lower and lower. it could go lower from here, but this is the world we're in. it's not a normal world. it's highly uncertain. >> okay, we're going to leave it there, neel, thanks for joining us this morning. >> thanks for having me. >> you bet. high temperatures and a summer drought are putting the squeeze on farmers. is it too late for the corn crops? cnbc's jane wells joins us from the iowa farm bureau's economic summit. good morning, jane. >> reporter: hey, becky. hundreds of farmers are here at iowa state to try to figure out how bad is it, and even if it rains, which it is in parts of illinois today, and could be in iowa, nebraska later this week, is it too late for corn? nearly half of the current corn

crop in the nation is in poor or very poor condition. cibc is calling it "officially the worst drought in a generation. "morgan stanley expects corn to average 7.85 a bushel "we anticipate prices in the double digits. it has never happened though a poll has analysts expecting corn to fall back below $7 before the end of the year. we talked to david miller, farm economist here, pre-sold a third of his crop at $5 a bushel to lock in prices. third of his crop because of yields may end up being half his crop. here's what he had to say. >> you see an ear like this, that's about half size. this is maybe two-thirds size. they should be about 40 kernels long, this is 30, this is about 26. will this be economically less than average economic return?

yes, even with the higher prices, the yield will be cut. this is probably a 40% to 50% yield cut. >> reporter: talking about seed companies which is very big here, piper jaffrey has an overweight, expects farmers to buy a lot of seed next year to make up for this year's disappointment and monday santo irrigates much more of its seed stock than competitors to. cibc like agrium, and citi raised its price target on agu to 100 bucks. what happens when prices go up, demand falls. prices have not gone up enough to see the demand fall as much as the government is predicting, and in fact a lot of them say the usda has to bring the numbers on yields or projections way down. later we'll talk to the agriculture secretary tom vilsack about that and theettal

mandate, and whether farmers should get aid coming off government aid. >> jane i'll bite maybe against my better judgment but i'm curious, i'm told i should ask you what a corn jerker is. >> reporter: well, it's not as bad as it sounds. corn jerker, at least when it comes to sweet corn before they used to have machines, would be the guys that would go through and jerk the cos obs off the stalks. there was a high school in illinois where their mascot they're called the cornjerkers. >> i remembered the corn detasselers. this must be at the end of the harvest. okay i get it. thank you, jane, see you later. >> reporter: um-hum. >> i'm glad you asked that question. if joe was here there would be a joke to be made. >> what are you talking about? >> mind in the gutter.

soybean futures fell sharp yesterday, big question, is this enough to keep prices down in one of the driest summers to date? joining us with more, mike hart, independent commodities trader and mike, that is the question. where are prices going to go as you look ahead simply because we're going to get a little rain, things are going to come down? i don't get it. >> you're right, yesterday we saw profit-taking, but this is coming off of last week, where we saw a massive run-up in both corn and soybeans, so i would think going forward, we're going to see this bullish rally continue. >> how long can it last? when is there going to be a tipping point truly downward, if there is one and that seems to be the expectation across the board, it's just how do you time it? >> that's always the million-dollar question, but i think the best thing you can do is just you phase these moves to the downside, and there's still a lot of upward moment numb this

mark momentum in this market and i say you ride with it and get behind it. >> you ever play the commodities markets? >> no.no, never. >> that's too dangerous for you? >> too dangerous, too volatile for me. >> too volatile for you. okay. mike, thank you for that. >> thank you. >> when we come back we'll get final thoughts from our guest host after the break. g for a bee to put your cash? here's one you may not have thought of -- fidelity. now you don't have to go to a bank to get the things you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits. now depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today and discover another reason serious investors are choosing fidelity.

>> i believe there is going to be a level of uncertainty and it will continue. keep in mind, what's interesting about s.a.p.'s position, we grew 22% year over year in europe. >> i think the ecb will step in to stop a banking crisis but i think we'll have a recession in spain, greece, portugal, for years to come. >> i think given all the macro risk right now people aren't really willing to pay up for those earnings because they don't believe in them. i think washington really holds the key. i think europe is going to remain a mess but i think we can work our way through it if we get a little relief in washington. >> nobody knows what's going on today. germany is going down for the first time in many years. i've seen that. of course they're supporting all

of europe. you don't know. i think a lot is going to do with what's going to happen with the election. >> "squawk box" where business leaders and investors turn first.

welcome back everybody. our stock of the day is u.p.s. that company actually coming in with earnings that were below expectations. but it's key here. we'll be watching this very closely because they pointed to some things around the globe. they pointed to china. they pointed to europe. they pointed to washington, d.c. for these problems. obviously those three problems are ones we talk about every single day. so we're looking at this as a potential indicator of the economy my apologies for missing something. >> no worries. no worries at all. >> i thought i missed something. i don't know what happened. >> u.p.s. shares down about 4% today. that is a stock to be watching very closely. let's get some parting shots from our guest host today stock market master and professor of business. we just mentioned u.p.s. we've been watching earnings all day long. what do you make of the earnings season so far? >> it's interesting.

an interesting note yesterday, i think we have apple after the close today. am i right? >> that is correct. >> if apple beats by 10%, which to some will be a disappointment, i think, if it goes like $11.30, $11.40 a share, and the others just from now on the rest of the companies just hit expectations, this will be an all-time record second quarter earnings. and you think about how remarkable that is. >> yeah. >> we're going to get gdp later this week. it's going to be 1.5% at most. think about if we could move ahead to 3 or 3.5 how good earnings can be. so, i mean, firms are doing remarkable in this environment despite the slow growth. i think that's one thing that is so important for investors. >> that is a hugely important point. probably one that gets glossed over. we focus on the blow ups and the misses but if you look overall there are a lot of companies just chugging right along. >> you don't need fast earnings growth given how much earnings

there are. now, another thing is dividends. there were articles in "the wall street journal" this week about a bubble in dividend paying stocks. i don't think so. i've looked at it and certainly they're popular now. but dividends are increasing 10% to 15% per year and firms still on average only pay out 33% of their earnings as dividends. they have a lot of leeway there to move those dividends up out of even, without earnings, actually rising. >> the real question that comes up every time we mention that, though, is what happens with the taxation policies. >> very good point. i was very comforted. a group of democrats have come to an alternative to obama's plan to tax dividends at the old, ordinary rate. they want to tax it at half the ordinary rate. and given that that top rate is 39.6 that brings it back to the 20%. which is what obama actually had campaigned for in the 2008 election. i could live